Cayetano shaves
tax proposal
‘We heard from them
loud and clear,’ Cayetano says,
proposing a lower GET hike and
breaks for retirees
By Rob Perez
Star-Bulletin
Responding to widespread criticism of his economic revitalization plan, Gov. Ben Cayetano today proposed reducing the recommended increase in the general excise tax, giving tax breaks to retirees and increasing the breaks for middle- and low-income taxpayers.
He also recommended softening the benefits to big corporations and high-income taxpayers.
In a packed hearing of the Senate Ways and Means Committee, Cayetano said criticism from retirees, businesses and others about elements of the Economic Revitalization Task Force plan prompted his administration to reshape the package.
"We heard from them loud and clear," Cayetano testified this morning in a rare appearance before a legislative committee.
The new plan calls for a roughly 19 percent increase in the GET -- from 4 percent to 4.75 percent -- instead of the original proposal to hike it nearly 34 percent, to 5.35.
To accomplish that, Cayetano said the provision reducing the pyramiding effect of the GET -- essentially a tax on a tax -- would be dropped from the package.
Addressing concerns from retirees, the administration is propos-ing that one low-income tax credit be set that has more value and benefits a broader range of people than the two credits proposed under the old package.
Under the old plan, most retirees living on pensions would have been hurt because of the GET increase.
But the new changes will benefit Hawaii retirees receiving up to $50,000 in pension income, or more than 90 percent of retirees, Cayetano said.
The revised plan also addresses criticism that the proposals developed by the 26-member task force gave the biggest benefits to the wealthy and big business.
Cayetano is proposing less of a reduction in personal income taxes for those making $60,000 and above. Instead of an across-the-board decrease of 40 percent at all income levels, as proposed under the old plan, the reductions would be adjusted downward for those making $60,000 and above, based on the three new tax brackets that would be created.
At $100,000 and above, the tax rate would drop from 10 percent to 8.5 percent the first two years, then to 7.5 percent in the third year. For those at the $80,000 level, the rate would fall to 8 percent in the first two years, then to 7 percent. At the $60,000 level, the rate would fall to 7.5 percent in the first two years, then 6.5 percent in the third.
But for those households making no more than $41,000 -- about Hawaii's median income -- the full 40 percent cut would be made over three years.
The proposed 50 percent reduction in the corporate and franchise tax rate also would be pared, dropping only 30 percent.
Brad Mossman, deputy director of the Department of Business, Economic Development and Tourism, said the tax cuts still would be the largest in state history.
Bette Tatum, a small business advocate, wasn't satisfied.
"I give them credit for trying to compromise, but they've got to come down to 4 percent" -- the current GET rate, she said.
Cayetano proposes
$111 million in cuts
The Health Department seems to
have its budget especially trimmed
By Mike Yuen
Star-Bulletin
In a 50-page budget message sent to legislators today, Gov. Ben Cayetano is recommending general-fund budget cuts of $111 million.
The proposed cuts are a result of his recent order to department heads to slash their budgets by as much as 10 percent, in light of the state's tight economic situation.
The reductions, however, also encompass shifting some programs from general to special funds, as the Department of Commerce and Consumer Affairs would be doing.
The cuts would achieve overall savings of $95 million, Cayetano told reporters this morning.
The state Health Department appears to be one of the hardest hit. Its peer education program, in which youths teach other youths about health programs, would be abolished, saving $493,009 and cutting two positions. Also, the noise control program would be eliminated, saving $136,099 and cutting six positions.
The state Health Planning Development Agency, which is charged with approving the building of any health facility or the purchase of major equipment, would be axed, saving $205,281 and eliminating eight positions.
"I have always been on record a very long time about wanting to abolish SHPDA," Cayetano said.
The Department of Human Services expects to save $9 million in Medicaid payments by tightening standards for admission to intermediate-care facilities and by diverting clients to less costly community-based services, and by "stabilizing reimbursement rates for all facilities."
Another $7 million would be saved by reducing general funds for QUEST, the managed-care program. The amount originally budgeted appeared to be higher than what actually needed to be paid out, the budget message said.
Cayetano said it is difficult to determine the total number of state workers who will lose their jobs from consolidations and program eliminations because of the "bumping" process. That process allows pink-slipped senior workers to take the jobs or less senior government employees.
He's hoping to accomplish most of the cuts through attrition, Cayetano said.
"I'm not prepared today to say 'X' number of people will be laid off or not," the governor said.
The Department of Education was largely spared for the immediate future: Its base biennium budget was untouched, although its supplemental budget request for next year -- about $25 million -- was scrapped.
